2.1.2. The relevant geographic market

Very similar notions are used to delineate the relevant market geographically. In competition policy the relevant geographical market has traditionally been defined as that geographic area that is characterised by the absence of trade barriers and within which one can therefore expect prices to converge after explicitly having taken transport costs into account (Elzinga 1994, 29). Therefore, all those actors are supposed to belong to one geographic market whose individual behaviour determines the collective supply and demand conditions on a given market and who therefore determine the market price (Shugart 1990, 140). Actors not belonging to a geographical market are thus assumed not to influence prices (and quantities) on a given market.

It is worth emphasising that the criterion for delineating the relevant geographical market is not the equality of prices but rather their interdependence, which is created by arbitrage. The existence of transport costs and other related costs (such as tariff and non-tariff barriers to trade) as such are therefore not sufficient to conclude that one is dealing with different geographical markets. As long as these costs are not prohibitive and a tendency for arbitrage thus exists, there is price interdependence and only a single geographically relevant market. The inverse is, however, not true: from the absence of trade in goods, one cannot conclude that one is dealing with two different markets.